Sainsbury’s chief executive Simon Roberts has said that UK grocery inflation has not been as severe as initially feared, though he cautioned that “pressure in the system” persists and the industry hopes for a swift resolution to the Middle East conflict. The comments come as the supermarket reported a better-than-expected rise in sales, driven by its Aldi price match initiative, hot weather and World Cup matches.
Inflation Outlook and Sales Performance
Roberts noted that it is still early in the year and there is “still uncertainty where inflation will go,” but suggested it could come in well below the Food and Drink Federation’s initial prediction of at least 9% by December. Despite warnings of a likely jump in price pressures due to the Strait of Hormuz blockade affecting energy and fertiliser shipping, food inflation has actually eased in recent months. Shop price inflation remained unchanged in June at 1.2% year-on-year, according to the British Retail Consortium.
Sainsbury’s, which also owns Habitat and Argos, reported a 2.7% rise in sales to £9.1bn in the three months to 20 June. Grocery sales were up 3.6%, exceeding expectations, as the retailer matched prices on hundreds of products to those at discount rival Aldi. However, Argos sales fell 0.5% despite a 2.2% increase in product volumes sold, due to discounting and a shift towards lower-priced items amid lacklustre consumer sentiment caused by the Middle East conflict and concerns about inflation and jobs.
Consumer Behaviour and Product Demand
Roberts said customers are being “much more cautious” on non-food purchases, with the market “more subdued and more promotional” than for groceries. While volumes rose for large TVs, fans, toys and paddling pools during warm weather in May and before the World Cup, sales of expensive items like furniture struggled. The company enjoyed a “really exceptional week” during the hot weather and World Cup fixtures for England and Scotland, with “a lot of demand” for fresh fruit, barbecue items and deli foods, and its “biggest ever” week for ice-cream, pizza and salads.
Sales via rapid delivery also surged as households ordered in while watching football and avoiding extreme heat. Another heatwave is expected to boost sales further next week. Roberts said staff and suppliers had been “working around the clock” to ensure fridges could cope with high temperatures, and that Sainsbury’s is investing “hundreds of millions of pounds” in new refrigeration equipment, with about 100 stores receiving upgrades.
Security Measures and Political Call
The company is also installing facial recognition technology to identify frequent shoplifters, expanding the system to 100 more stores after a trial in 55 outlets resulted in 90% of identified offenders staying away. Roberts called on the likely next prime minister, Andy Burnham, to introduce “policies that can support confidence and optimism” among shoppers, reiterating calls to reduce energy costs for food producers and support hiring, especially of young people. “We have seen a lot of regulatory cost coming to this industry in the last couple of years and I would like to see a real focus on growth,” he said.
Market Reaction and Industry Context
Sainsbury’s shares rose 2.4% on Tuesday after slipping back in recent months amid worries about the uncertain consumer backdrop. In its previous update in April, the company received a tepid response from shareholders after indicating profits were likely to remain roughly steady in the current financial year. Earlier this month, Tesco boss Ken Murphy said sentiment among shoppers had been affected by the Middle East conflict but the war had not yet led to higher prices, adding that hotter weather was expected to have more impact on grocery sales than home nation World Cup wins.
